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HD(R) Afhandling forår 2014 Jens Kallehave Værdiansættelse af William Demant Holding A/S Undervurderet? HD-(R) Afhandling forår 2014 Forfatter: Jens Kallehave Vejleder: Finn Schøler Aarhus Universitet Afhandlingens omfang: 155.394 tegn (med mellemrum) HD(R) Afhandling forår 2014 Jens Kallehave Executive summery Since the financial crisis and especially after the bankruptcy of Lehman Brothers in September 2008 the attention to stock prices has been increased. The ordinary investor experienced within a short time, how a significant decline in stock prices had a direct impact on the respective assets. In such cases it is useful to examine whether the investor paid the fair value per share. The Danish company Willliam Demant Holding A/S (WDH) is among analysts considered as a sta- ble investment because of the industry that is regular annual increasing. WDH develops, manufac- tures and sells hearing aids worldwide. The industry of hearing aids contains considerable potential due to the booming market of hearing impaired. Actually suffer sixteen percent of the global adult population from hearing loss, and only one in five hearing impaired uses hearing aids. These facts led me to consider whether the share of WDH is underestimated. Although the market is huge and the potential for WDH is significant the analysts recently downgraded the outlook for the stock price at the presentation of annual report of 2013. The immediate assumption that the share is un- dervalued and the downgrade provides an interesting paradox and therefore this thesis deals with the fair value of WDH. The purpose of the thesis is to ensure the private investor insight into the strategic and economic conditions of WDH. Through a fundamental analysis focusing on expectations for future growth the thesis will contain a valuation of the fair value and this makes it possible to confirm or deny this hypothesis: The share value of WDH was underestimated at the time of presentation annual report 2013 in view of the potential. The method of analyzing a fundamental value is based upon a business case (WDH), which helps to ensure a continuous structured analytical approach. The theories of fundamental analysis and esti- mating valuation is based upon the primary literature of the Danish author Ole Sørensen “Regnskabsanalyse og værdiansættelse – en praktisk tilgang”. HD(R) Afhandling forår 2014 Jens Kallehave The strategic analysis highlights the fact that there are many external and internal factors and condi- tions that may affect the value of WDH in the future. These factors are summarized in a SWOT analysis and shows which factor are growth drivers and which is growth reducing. WDH are deemed to have a strong and leading strategic position in the market, and that is due to the compa- ny’s ability to control and manage these external and internal non-financial value drivers. WDH is assessed to maintain this strategic position for many years. In the analysis period 2009-2013 WDH has as strong economic position. The financial analysis is based upon the extended DuPont model and that showed a high level of return on equity, but even though the level is halved from 2009 to 2013. The analysis of the profitability revealed that the neg- ative trend in return of equity was caused by a decrease in return on invested capital. By analysis the underlying financial value drivers the reason of the decreasing showed. It was because of a neg- ative trend in turnover rate of the assets which was affected by the fact that the increase in revenue not could be absorb in the increase in the net operating assets (invested capital). Despite the negative trend of return on equity the analyses of growth shows optimism. The industry of hearing aids still stable annual growth and overall the economic position of WDH is still in the positive direction, though with diminished speed. The budgeting is formed by the fundamental analysis and that means that WDH’s strong strategic and economic position will have positive effects on the budgeting. The main factor in budgeting is considered to be sales growth and this factor is calculated on the basis of continuing growth, but also by empirical correspondence with external analyst. The analysis of growth revealed several trends that have been used to estimate the level and trend of the underlying financial value drivers. The result of these estimations is a 5-year budget form that contains the value drivers and a 5-year pro forma budget that shows the expected performance in the budget and infinite terminal period. The final step in being able to confirm or deny the hypothesis about WDH being underestimated is calculated by using the discounted free cash flow

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